Are charitable contributions tax deductible

17 Jan

Are Charitable Contributions Tax Deductible?

Posted at 10:05h

The Australian Taxation Office (ATO) has several criteria for what does and does not apply regarding tax deductions for charitable contributions or donations. But how can you determine which charitable gifts can be deducted from your taxes and which ones can’t?

This article details what you need to know to manage charitable deductions with confidence. From what applies and keeping records to what you can and can’t claim, we’re here to help. For personalised advice, contact our team at Curve Accountants today.

What Makes a Donation Tax Deductible?

Several key criteria must be met to receive a tax deduction for your charitable contribution. 

The first requirement is that your gift or donation was given to a Deductible Gift Recipient organisation. This means it is an official organisation that is registered with the ATO. 

For instance, many online crowdfunding campaigns or similar charities will not be officially recognised as Deductible Gift Recipient organisations. However, you may also be able to claim certain donations to political or independent parties and individuals, though this comes with different criteria.

Next, your charitable contribution must be a gift. This means that if you receive any material benefit or monetary compensation from the organisation you are donating to, you are not eligible for a tax deduction. However, this does not apply to any token items you may have received in return. These are often stickers or pins and do not equate to the monetary value of your contribution.

Likewise, your contribution must also have monetary value. This can include financial assets, shares, property and money. You must also adhere to any individual gift conditions that the relevant organisation may have.

Making the Right Claims

If you have made a donation that meets the above criteria, you are eligible to claim a deduction. 

But how much can you claim? These deductions are dependent on the type of contribution you have made to the charity.

If you have donated money, you can claim the exact amount you gifted as long as your donation exceeds $2. Furthermore, if you have gifted a property, you may be able to claim either the value of the property at the time of the donation or the amount you paid for it. You will be entitled to claim whichever value is lower. 

However, this property must be gifted within the first 12 months of its purchase to be deducted. If you did not purchase the property, it can be deducted if its value exceeds $5,000. These rules also apply to any shares you may have gifted. Likewise, shares must also be listed with a public company and be quoted on the Australian Securities Exchange.

Heritage and Cultural Gifts

Heritage and cultural gifts also have certain criteria to be claimed. A heritage gift is an item of outstanding historical, natural or cultural significance. To be eligible to claim a tax deduction, this must be gifted to a National Trust organisation and be accepted and preserved for the public.

The amount you can claim for a heritage gift is usually the average of two or more written valuations of the gift. Likewise, a cultural gift is any culturally significant item gifted to a public facility. For this, you can generally claim the market value of your gift.

Other Types of Charitable Deductions

If you have contributed to a charity through a third party you may also be eligible for a deduction. For example, an authorised business collecting funds for a specific charity can be tax deductible as long as it meets the standard charitable contribution criteria. However, you will need proof of contribution, such as a receipt, to receive your deduction.

On the other hand, there are accommodations in place for small, harder-to-track donations. If you have made small coin donations to bucket charities or collections, you are eligible to claim a total deduction of $10.

Recording Your Gifts

It’s important to keep comprehensive records in order to reliably receive a tax deduction for your charitable contributions. These must state what organisation you gifted to, that your donation was a gift, and the relevant organisation’s ABN or business number.

These can come in several forms such as receipts, letters, or official documents. As long as you have these recorded and can provide them when necessary, you will be able to claim your charitable contribution deduction.

Managing Your Tax Deductions

Have you made contributions to different charities? At Curve Accountants, we can help you manage and organise your tax information so you can receive your charitable contribution deduction. Understanding and navigating the different eligibility criteria can be overwhelming, but our experienced team makes it easy.

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